Germany is considering tight measures for its firms that are deeply exposed to the Chinese market, forcing them to publish more information about their business operations in the country and perhaps do regular stress tests for geopolitical risks.

According to Reuters, the proposed rules are part of a new business strategy from Chancellor Olaf Scholz’s government towards China as it seeks to reduce dependency on the world’s second-biggest economy.

Reuters cited a confidential document, saying, “The aim is to change the incentive structure for German companies with market economy instruments so that reducing export dependency is more attractive.” 

China has been Germany’s biggest trade partner since 2016 as the two economic partners tie in key industries like cars and machinery.

The document cited their deep energy dependence on Russia before the Russian invasion of Ukraine as a mistake and warned of repeating this. The Russian-Ukraine war made Germany reevaluate potential risks in their trading relationships with China. 

It said, “We must not make this mistake again. This is the responsibility of politicians and companies.” 

There are signs that Germany has started to distance itself from China to explore other avenues with Chancellor Olaf Scholz’s recent trip to South Asia. 

According to Marko Walde, general representative of the German Chamber of Commerce in Vietnam, 5,000 German businesses are currently working in China, and 90% are considering diversifying their industrial chains to lessen their impact on the Chinese economy.

Berlin authorities blocked two Chinese takeovers of German tech companies on November 9, citing a potential loss of vital know-how.Berlin stepped in last month when COSCO, a major Chinese shipping company, announced intentions to acquire a 35% stake in the company that runs a port facility in Hamburg. The German cabinet later gave the nod to a 24.9% stake investment, which still sparked controversy.

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